📚 Part 1: Understanding Investment Bonds

1. What is an insurance investment bond?

A loan given to an insurance company

A savings product that combines life insurance with investment

A type of government bond

A corporate share certificate

2. Which of these are typical features of investment bonds? (Select all that apply)

Minimum investment usually £1,000 or more

Guaranteed returns

Tax-deferred growth

Access to professional fund management

No investment risk

3. Investment bonds are particularly suitable for:

Young people saving small amounts

Higher-rate taxpayers seeking tax efficiency

People wanting guaranteed returns

Emergency fund savings

4. The main tax advantage of investment bonds is:

No tax is ever paid

Tax is deferred until withdrawal

Immediate tax relief on contributions

Lower rate of capital gains tax

✏️ Part 2: Key Features and Risks

5. Complete the sentence: Investment bonds allow you to withdraw up to _______ of your original investment each year without immediate tax consequences.

Answer: _____________%

6. List three potential risks associated with investment bonds:

7. Explain why investment bonds might be more suitable for higher-rate taxpayers than basic-rate taxpayers:

🧮 Part 3: Practical Application

8. Sarah is a higher-rate taxpayer who invests £10,000 in an investment bond. After 5 years, her bond is worth £14,000. She withdraws £500 per year (5% annually). Calculate her total withdrawals and explain the tax implications:

9. Compare investment bonds with ISAs. Give two advantages and two disadvantages of investment bonds compared to ISAs:

10. Extension Activity: Research and explain what happens when the 5% annual withdrawal allowance is exceeded and how "top slicing relief" works: